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The prodigal son returns: Tax implications

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Q. My son, who graduated college, lost his job last year and moved back home. Can we still deduct him as a dependent? Anonymous

A. Yes, but only if all the tax law requirements are met. Essentially, the dependent must be a qualifying child or relative living in your home and can’t have more gross income than the personal exemption amount ($3,800 for 2012). Note: This gross income limit doesn’t apply to children who are under age 19 or full-time students under age 24. Also, you must provide more than half of your son’s support, but you can add on the value of the food and lodging you supply.

Tip: There is no age limit on tax dependents, but the rules are looser for younger kids and full-time students under age 24, because the gross-income restriction doesn’t apply.

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